Climate change: are banks and supervisors prepared?

Panellists:

Sarah Breeden, Executive Director, UK Deposit Takers Supervision, Bank of England
Frank Elderson, Vice-Chair of the Supervisory Board of the European Central Bank
Sonja Gibbs, Managing Director and Head of Sustainable Finance, Institute of International Finance
Isabelle Mateos y Lago, Managing Director and Global Head of the Official Institutions Group, BlackRock
Moderator: Irene Heemskerk, Head of the climate change centre, European Central Bank

Climate-related risks are material and banks and supervisors need to address them. Where do we stand in tackling climate change concerns? Have banks bolstered their analytical capabilities and tailored their strategies and frameworks to the new reality? Is addressing climate risks more of a benefit or a cost to the banking sector?

The European Central Bank is too slow and climate change can’t wait.
Take action and sign the Sum of Us petition :
https://bit.ly/ECB-climate-chaos

We’ve looked at how banks are taking climate and environmental risks into account in their business. What did we find? Are banks meeting our supervisory expectations?

Our host Katie Ranger discusses the results of our thematic review with Executive Board member and Supervisory Board Vice-Chair Frank Elderson on The ECB Podcast.

The views expressed are those of the speakers and not necessarily those of the European Central Bank.

Published on 2 November 2022 and recorded on 21 October 2022.

In this episode:

01:10 – The results of our thematic review
How banks are managing climate and environmental risks, and what happens if they don’t meet our supervisory expectations.

11:20 – Zooming in on bank strategies
What steps banks have taken to understand how climate-related risks might impact their business model, and how they intend to adjust their strategy, such as through transition plans, plus areas that need more work.

18:06 – What is holding banks back from acting
Why banks need to look at both short and longer term horizons when thinking about these risks.

20:18 – Zooming in on risk management
How banks are taking climate-related risks into account when ensuring they have enough capital to cover their risks, and where more progress is needed.

23:50 – Why can’t banks just stop funding carbon-intensive activities?
Why banks need transition plans to manage their risks as the world moves towards a greener economy, and our role here as supervisor.

26:46 The next steps for supervisors and banks
How we will supervise banks to make sure they adequately manage climate-related risks and what we will do if they don’t, and what banks need to do to continue their path towards greening their business.

29:10 – Our guest’s hot tips

Additional material:

Walking the talk – Banks gearing up to manage risks from climate change and environmental degradation. Results of the 2022 thematic review on climate-related and environmental risks, 2 November 2022
https://www.bankingsupervision.europa.eu/ecb/pub/pdf/ssm.thematicreviewcerreport112022~2eb322a79c.en.pdf?25fcb44be2443e30f9dd0ab68c0a7d84

Press release: ECB sets deadlines for banks to deal with climate risks, 2 November 2022
https://www.bankingsupervision.europa.eu/press/pr/date/2022/html/ssm.pr221102~2f7070c567.en.html

The ECB Blog by Frank Elderson: Banks need to be climate change proof, 2 November 2022
https://www.bankingsupervision.europa.eu/press/blog/2022/html/ssm.blog221102~398faec8ca.en.html

The ECB Podcast: Greening the financial system: milestones in our climate change journey, 9 July 2022
https://www.ecb.europa.eu/press/tvservices/podcast/html/ecb.pod220709_episode36.en.html

The ECB Podcast: Time to act now: results of the economy-wide climate stress test, 22 September 2021
https://www.ecb.europa.eu/press/tvservices/podcast/html/ecb.pod210922_episode20.en.html

The ECB Podcast: Tackling climate change as a central bank: Between motivation, obligation and limitation, 12 May 2021
https://www.ecb.europa.eu/press/tvservices/podcast/html/ecb.pod210512_episode16.en.html

The ECB Podcast: Climate change and the role of central banks, 3 March 2020
https://www.ecb.europa.eu/press/tvservices/podcast/html/ecb.pod200303_episode5.en.html

Climate change and banking supervision
https://www.bankingsupervision.europa.eu/about/climate/html/index.en.html

Climate change and the ECB
https://www.ecb.europa.eu/ecb/climate/html/index.en.html

UN Biodiversity Conference (COP 15), 7 – 19 December 2022
https://www.unep.org/un-biodiversity-conference-cop-15

Smithsonian American Art Museum: Online Gallery for Alexander von Humboldt and the United States: Art, Nature, and Culture
https://americanart.si.edu/exhibitions/humboldt/online

European Central Bank
www.ecb.europa.eu
European Banking Supervision
www.bankingsupervision.europa.eu

How can we as a central bank contribute to tackling climate change? What’s our role as a central bank and supervisor?

Our new host Katie Ranger discusses these questions with Executive Board members Isabel Schnabel and Frank Elderson in this episode of The ECB Podcast.

The views expressed are those of the speakers and not necessarily those of the European Central Bank.

Published on 12 May 2021 and recorded on 7 May 2021.

In this episode:

01:14 – Where we stand in the fight against climate change
What motivates our guests Isabel Schnabel and Frank Elderson to be vocal in the fight against climate change, what has been achieved so far and where we need to go from here.

13:10 – Legal aspects and the price stability mandate
What our price stability mandate tells us about our commitment to tackling climate change, and what our obligations and limitations are.

20:41 – What monetary policy can do
How climate change affects our mandate to maintain price stability, how our asset purchases could become greener, and why this is easier said than done and what market neutrality has to do with it.

35:16 – What banking supervisors can do
Why banks play a key role in the transition towards a green economy, how supervisors support banks to manage climate risks, and why good data and thorough stress tests play a key role.

Further reading:

Christine Lagarde: Towards a green capital markets union for Europe
www.ecb.europa.eu/press/key/date/2…c98730ee.en.html

Frank Elderson: All the way to zero: guiding banks towards a carbon-neutral Europe
www.ecb.europa.eu/press/key/date/2…8606edca.en.html

Frank Elderson: Greening monetary policy
www.ecb.europa.eu/press/blog/date/…26af8606.en.html

Isabel Schnabel: From green neglect to green dominance?
www.ecb.europa.eu/press/key/date/2…df48854e.en.html

Isabel Schnabel: Never waste a crisis: COVID-19, climate change and monetary policy
www.ecb.europa.eu/press/key/date/2…56b0f988.en.html

Isabel Schnabel: When markets fail – the need for collective action in tackling climate change
www.ecb.europa.eu/press/key/date/2…8b0b672f.en.html

Luis de Guindos: Shining a light on climate risks: the ECB’s economy-wide climate stress test
www.ecb.europa.eu/press/blog/date/…bc68ffc5.en.html

Climate change and the ECB
www.ecb.europa.eu/ecb/climate/html/index.en.html

European Central Bank
www.ecb.europa.eu

European Banking Supervision
www.www.bankingsupervision.europa.eu

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